ALJDEC decisions subject to certification as final

2013A-2464-ROC · Registrar of Contractors · 2013-08-14

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: July 25, 2013 APPEARANCES: Arizona Pools & Landscape LLC appeared through its qualifying party and sole member, Jonathan Charnock. The Arizona Registrar of Contractors was represented by Assistant Attorney General John Tellier. ADMINISTRATIVE LAW JUDGE: Tammy L. Eigenheer _____________________________________________________________________

FINDINGS OF FACT Background and Procedure Jonathan Charnock is a person listed and named on License No. K-21.218384 held by Dreamscapes Lighting and Landscape LLC (“Dreamscapes”) since it was issued on April 9, 2006, and on License No. B-5.262271 held by Dreamscapes since it was issued on March 2, 2010. On or about November 15, 2012, Mr. Charnock, on behalf of Arizona Pools & Landscape LLC (“Applicant”), submitted two Applications for Contractor’s License to the Arizona Registrar of Contractors (“the Registrar”). Mr. Charnock was listed on the applications as Applicant’s qualifying party and owner. Mr. Charnock answered “No” to the questions on the applications about whether anyone listed on the applications was delinquent in payment of any state or federal income taxes, payroll withholding, social security, unemployment, or workers’ compensation. On or about November 27, 2012, the Registrar notified Mr. Charnock that there were five open complaints against License No. B-5.262271 and three open complaints and one Default Order issued against License No. K- 21.218384., and that the applications could not processed until the complaints had been resolved. On February 21, 2013, Mr. Charnock, on behalf of Applicant, submitted an Application for Contractor’s License to the Registrar for a B-5, General Swimming Pool Contractor license. Mr. Charnock was again listed on the application as Applicant’s qualifying party and owner. Mr. Charnock answered “No” to the question on the application “Have you filed a petition for bankruptcy protection within the last 7 years under your individual name or on behalf of any business entity?” Mr. Charnock also answered “No” to the question on the application about whether anyone listed on the application had ever been delinquent in payment of any state or federal income taxes, payroll withholding, social security, unemployment, or workers’ compensation. On April 1, 2013, Mr. Charnock, on behalf of Applicant, submitted an Application for Contractor’s License to the Registrar for a K-21, Landscaping and Irrigation Systems license. Mr. Charnock was again listed on the application as Applicant’s qualifying party and owner. Mr. Charnock answered “No” to the question on the application “Have you filed a petition for bankruptcy protection within the last 7 years under your individual name or on behalf of any business entity?” Mr. Charnock also answered “No” to the question on the application about whether anyone listed on the application had ever been delinquent in payment of any state or federal income taxes, payroll withholding, social security, unemployment, or workers’ compensation. On or about May 30, 2013, the Registrar’s Chief of Licensing sent a letter to Applicant indicating that the Registrar was denying its license applications under A.R.S. §§ 32-1154(A)(1); 32-1154(A)(2); 32-1154(A)(3), namely A.A.C. R4-9-108 and A.R.S. § 32-1154(A)(23); 32-1154(A)(4); 32- 1154(A)(6); A.R.S. § 32-1122(D); 32-1154(A)(9); 32-1154(A)(13), namely A.R.S. § 32-1124(B) and A.R.S. § 32-1158(B)(9) and/or A.R.S. § 32- 1158.01(A); 32-1154(A)(15); 32-1154(A)(16); 32-1154(A)(17); 32-1122(F)(1); 32-1161(C); 32-1151; and 32-1165. Mr. Charnock requested a hearing on the Registrar’s denial. The Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing. An evidentiary hearing was held on July 25, 2013. Mr. Charnock testified on Applicant’s behalf and submitted four exhibits. The Registrar submitted twelve exhibits and presented the testimony of Lawrence Mathews, Chief of Licensing. Hearing Evidence Dreamscapes’ License History Mr. Charnock was the person listed and named on License No. K-21.218384 held by Dreamscapes since it was issued on April 9, 2006, and on License No. B-5.262271 held by Dreamscapes since it was issued on March 2, 2010. Mr. Charnock was the qualifying party, member, and only person listed on Dreamscapes’ licenses. Administrative notice is taken of Dreamscape’ License record as reflected on the Registrar’s public website. Such prior License record reflects that Dreamscapes’ License No. K-21.218384 and License No. B-5.262271 were voluntarily cancelled on March 15, 2013. Dreamscapes’ License No. K-21.218384 has had 15 complaints since the license was issued on April 9, 2006. In the 12 months preceding this application, 8 complaints had been received, of which 4 alleged poor workmanship. Dreamscapes’ License No. B-5.262271 has had 23 complaints since the license was issued on March 2, 2010. In the 12 months preceding this application, complaints had been received, including non-payment, abandonment, contracting beyond the scope of the license, failure to take corrective action, and others. Nondisclosed Bankruptcy On November 29, 2012, Mr. Charnock, on behalf of Dreamscapes, filed for Chapter 7 bankruptcy and received protection against complaints through an automatic stay. On both the February 21, 2013, application and the April 1, 2013, application, Mr. Charnock answered “No” to the question on the application “Have you filed a petition for bankruptcy protection within the last 7 years under your individual name or on behalf of any business entity?” Workmanship, Failure to Take Corrective Action, and Abandonment Gregory and Liliann Walker On or about May 21, 2012, Gregory and Liliann Walker (“the Walkers”) entered into a contract with Dreamscapes to build a new pool, landscape the backyard, and pour concrete slabs around the pool for a total contract amount of $26,200.00, which was paid in full. The Walkers filed a complaint with the Registrar alleging poor workmanship. Following an inspection, a Corrective Work Order (“CWO”) was issued to Dreamscapes. On or about November 16, 2012, the Registrar sent a letter to Dreamscapes indicating a request for formal citation had been made. On or about November 29, 2012, Dreamscapes filed for Chapter 7 bankruptcy protection and received protection against complaints through the automatic stay. On March 13, 2013, the Registrar received a License Cancellation Request from Mr. Charnock regarding both of Dreamscapes’ licenses. On or about May 16, 2013, Dreamscapes’ licenses were cited by the Registrar. Natalie Hayward and Mark Oldroyd On or about August 22, 2012, Natalie Hayward (“Hayward”) and Mark Oldroyd (“Oldroyd”) entered into a contract with Dreamscapes for roofing, landscaping, and a pool refurbish for a total contract amount of $69,547.68, of which they had paid $62,592.91 for services provided. When the plans were submitted to the Town of Cave Creek for approval, the Town rejected the plans because part of the job was not within the scope of work for either of Dreamscapes’ licenses. Mr. Charnock contacted the Registrar and confirmed at that time that the patio roof included in the contract was not within the scope of Dreamscapes’ licenses. On or about November 29, 2012, Dreamscapes filed for Chapter 7 bankruptcy protection and received protection against complaints through the automatic stay. Hayward and Oldroyd filed a complaint with the Registrar alleging Dreamscapes had abandoned their refurbish job and they were owed $19,343.23. On or about January 25, 2013, Hayward and Oldroyd received an Order Re: Motion for Relief From Automatic Stay in which it was ordered that the automatic stay is lifted and thus modified to authorize Natalie Hayward and Mark Oldroyd: (1) to continue to the prosecution of a complaint against Debtor with the Arizona Registrar of Contractors; (2) to continue prosecution of an administrative claim against Debtor with the Arizona Registrar of Contractors Recovery Fund for any damages incurred by Natalie Hayward and Mark Oldroyd; and (3) to potentially commence a civil suit against the Debtor and any surety of the Debtor, in Maricopa County Superior Court, for the sole purpose of obtaining a judgment to be used as a basis for recovery from any surety of the Debtor and/or the Arizona Registrar of Contractor Recovery Fund.

Exhibit 12.

On or about February 22, 2013, a jobsite inspection was conducted and a CWO was issued to Dreamscapes. On or about March 5, 2013, the Registrar sent a letter to Dreamscapes stating that neither of Dreamscapes’ licenses include in the scope of work installing exterior doors or the removal and replacement of a patio structure. On or about March 13, 2013, Hayward notified the Registrar that Dreamscapes had not completed the work indicated in the CWO. On or about April 11, 2013, Dreamscapes’ licenses were cited by the Registrar. On or about April 23, 2013, Mr. Charnock sent a letter to the Registrar indicating that Dreamscapes had filed for Chapter 7 bankruptcy protection and that all complaints should stop immediately as required by the bankruptcy protection code. Failure to Pay Workers’ Compensation At the time Dreamscapes filed for Chapter 7 bankruptcy protection, it filed schedules of claims indicating Dreamscapes had outstanding claims to the Arizona Department of Revenue, City of Phoenix, Internal Revenue Service, and SCF General Insurance Company for workers’ compensation premiums. Mr. Charnock indicated he did not owe those taxes and workers’ compensation premiums personally, but that they were owed by Dreamscapes. Unlicensed Advertising In an issue of Saguaro Gold Magazine, Volume 16, Number 2, Applicant had an advertisement including the pending ROC license numbers assigned to the applications submitted by Applicant. The pending license numbers were never approved by the Registrar. Mr. Charnock acknowledged the advertising was improperly published in the magazine. Mr. Charnock stated he believed the application would be approved by the time the advertisement was published. On or about March 8, 2013, the Registrar issued a Civil Citation to Mr. Charnock and to Applicant for advertising in violation of A.R.S. § 32-1165 and imposing a civil penalty of $1,500.00. Mr. Charnock has not paid the civil penalty. CONCLUSIONS OF LAW 1. This matter lies within the Registrar’s jurisdiction.[1] 2. Applicant bears the burden of proof to establish that it meets statutory qualifications for a contractor’s license by a preponderance of the evidence.[2] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[3] 3. Mr. Charnock argued that he did not provide false information regarding the bankruptcy because he did not file for bankruptcy, Dreamscapes did. However, the question on the applications asks whether you have filed for bankruptcy protection “under your name or on behalf of any business entity.” The evidence established Mr. Charnock filed for Chapter 7 bankruptcy protection in November 2012 on behalf of Dreamscapes. Therefore, he provided false information on the applications. The non-disclosure of requested application information is a violation of A.R.S. § 32-1154(A)(6)[4] and A.R.S. § 32-1122(D).[5] 4. With respect to the Walker project, the evidence established Mr. Charnock, through Dreamscapes, did not meet workmanship standards and failed to take corrective action following the CWO in violation of A.R.S. § 32-1154(A)(3),[6] namely A.A.C. R4-9-108,[7] and A.R.S. § 32- 1154(A)(23).[8] 5. With respect to the Hayward and Oldroyd project, when Dreamscapes filed for Chapter 7 bankruptcy protection, it was stayed from engaging in any further operations. The relief from the automatic stay that was issued did not authorize Dreamscapes to perform any further work, but allowed Hayward and Oldroyd to pursue the complaint and claim against the Recovery Fund. 6. Therefore, the evidence established that Mr. Charnock, through Dreamscapes, did not meet workmanship standards in violation of A.R.S. § 32-1154(A)(3). However, the evidence failed to establish that Mr. Charnock, through Dreamscapes, abandoned the contract or refused to perform without legal excuse in violation of A.R.S. § 32-1154(A)(1)[9] or failed to take corrective action following the CWO in violation of A.R.S. § 32-1154(A)(23) with respect to the Hayward and Oldroyd project. 7. Mr. Charnock also argued that he did not provide false information regarding the taxes and workers’ compensation premiums owed because he did not personally owe those amounts, Dreamscapes did. The question on the applications does not reference any prior business entity, therefore it appears to be a question relating to the person applying and the entity named in the application. No evidence was submitted to establish Mr. Charnock had ever been delinquent in payment of any taxes or workers’ compensation premiums separate from those owed by Dreamscapes in violation of A.R.S. § 32-1154(A)(4).[10] 8. Because he was not under an obligation to disclose Dreamscapes’ delinquency in the payment of any taxes or workers’ compensation premiums, the failure to do so was not a violation of A.R.S. § 32- 1154(A)(6) or A.R.S. § 32-1122(D). 9. Mr. Charnock did not dispute that Applicant advertised in a publication with a listed ROC license number that had not yet been issued. Mr. Charnock indicated he had set up the advertising so it would be ready when the application was approved and the license issued, but the advertising went forward prior to the approval. 10. The evidence established Applicant advertised it was the holder of two ROC licenses in violation of A.R.S. § 32-1165.[11] 11. The history of complaints against Dreamscapes together with the false information provided on the instant applications and improper advertising provide evidence of lack of good character and reputation under A.R.S. § 32-1122(D). 12. Mr. Charnock testified that he did not want to file for Chapter 7 bankruptcy protection, but that it was necessary due to general contractors failing to pay him and Dreamscapes’ resulting inability to pay its subcontractors. 13. A contractor’s license is a privilege, not a right. Due to the volatile nature of the construction industry, small contracting businesses frequently experience cash flow problems. “[T]he Registrar is charged with the overall responsibility of protecting the welfare of the public dealing with persons engaged in the building contracting vocations and afford the public protection against incompetent, inexperienced, unlawful and fraudulent acts of building contractors.”[12] On this record, Mr. Charnock did not establish that he is eligible for the Registrar to grant Applicant a contractor’s license without exposing the public to an unreasonable risk of financial loss. RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the Registrar’s order, the Registrar affirm the decision to deny Arizona Pools & Landscape LLC’s applications for contractor’s licenses. In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be 40 days from the date of that certification. Done this day, August 14, 2013.

/s/ Tammy L. Eigenheer Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] See A.R.S. § 32-1122. [2] See A.R.S. § 41-1092.07(G)(1); A.A.C. R2-19-119; see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [3] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [4] A.R.S. § 32-1154(A)(6) provides the holder of a license or any person listed on a license pursuant to this chapter shall not commit any of the following acts or omissions: “Misrepresentation of a material fact by the applicant in obtaining a license.” [5] A.R.S. § 32-1122(D) provides in relevant part as follows: To obtain or renew a license under this chapter, each person shall be of good character and reputation. Lack of good character and reputation may be established by showing that a person has . . . committed any act that, if committed or done by any licensed contractor, would be grounds for suspension or revocation of a contractor's license or by showing that the person was named on a contractor's license that was suspended or revoked in another state. [6] A.R.S. § 32-1154(A)(3) provides the holder of a license or any person listed on a license pursuant to this chapter shall not commit any of the following acts or omissions: “Violation of any rule adopted by the registrar.” [7] A.A.C. R4-9-108 requires that “[a]ll work shall be performed in a professional and workmanlike manner” and that “[a]ll work shall be performed in accordance with any applicable building codes and professional industry standards.” [8] A.R.S. § 32-1154(A)(23) provides the holder of a license or any person listed on a license pursuant to this chapter shall not commit any of the following acts or omissions: Failure to take appropriate corrective action to comply with this chapter or with rules adopted pursuant to this chapter without valid justification within a reasonable period of time after receiving a written directive from the registrar. The written directive shall set forth the time within which the contractor is to complete the remedial action. The time permitted for compliance shall not be less than fifteen days from the date of issuance of the directive. A license shall not be revoked or suspended nor shall any other penalty be imposed for a violation of this paragraph until after a hearing has been held. [9] A.R.S. § 32-1154(A)(1) provides the holder of a license or any person listed on a license pursuant to this chapter shall not commit any of the following acts or omissions: “Abandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal.” [10] A.R.S. § 32-1154(A)(4) provides the holder of a license or any person listed on a license pursuant to this chapter shall not commit any of the following acts or omissions: “Failure to comply with the statutes or rules governing social security, workers' compensation or unemployment insurance.” [11] A.R.S. § 32-1165 provides as follows: Except as authorized by section 32-1121, subsection A, paragraph 14, subdivision (c), it is a class 1 misdemeanor for any person to advertise that he is able to perform any service or contract for compensation subject to regulation by the registrar under the terms of this chapter unless a license under the terms of this chapter is first obtained regardless of whether his operations as a contractor are otherwise exempt. [12] Burrows v. Taylor, 129 Ariz. 212, 214, 630 P.2d 35, 37 (Ct. App. 1981); see also Laws 1985, Ch. 334, § 1 (“The goals and objectives of the registrar of contractors are to protect the public health, safety and welfare by licensing, bonding and regulating contractors engaged in residential construction . . . .”).

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